Lloyd’s posts £1.8bn half-year loss
Rising interest rates have negatively impacted the half-year results of Lloyd’s, which has reported an overall loss of £1.8 billion (HY 2021: £1.4 billion profit) driven by a net investment loss of £3.1 billion (HY 2021: £0.6 billion income) from unrealised mark-to-market losses.
As investment maturities are short dated, Lloyd’s said, the market will begin to benefit from higher interest rates in 2023 and therefore improved investment returns.
John Neal, CEO of Lloyd’s, said: “With political and economic uncertainty looming large over society, it’s more important than ever that insurers are ready to support.
“Lloyd’s results today point to both the sustainable performance of our market and the resilience of our capital position, enabling us to continue supporting customers through whatever lies ahead.”
He added: “Rising interest rates, while prompting an unrealised investment loss on paper at the half year, will be good news for insurers in the long term as returns on assets strengthen in 2023 and beyond.
“Meanwhile, with the conflict in Ukraine continuing to inflict devastating consequences, we’ve taken proactive steps to protect our customers from the fallout while ensuring we can support them – and continue driving sustainable performance – through the uncertain times ahead.”
Lloyd’s reported an improved underwriting result for the first six months of 2022, with an underwriting profit of £1.2 billion (HY 2021: £0.96 billion) and a combined ratio of 91.4 per cent (HY 2021: 92.2 per cent).
The underlying combined ratio was 81.5 per cent (HY 2021: 85.4 per cent).
Notwithstanding a challenging year of natural catastrophes, the invasion of Ukraine, inflation, and other geopolitical factors, this marks a 0.8 per cent improvement on 2021 and the strongest combined ratio since 2015, Lloyd’s said.
The attritional loss ratio improved to 48.9 per cent (HY 2021: 50.5 per cent), while the expense ratio showed a 0.4 percentage point improvement at 35.4 per cent.
Lloyd’s expects expenses to continue falling as it delivers sustainable performance and invests in digitalisation through its Blueprint Two programme to drive improved efficiency.
Lloyd’s leveraged favourable trading conditions to achieve premium growth, with gross written premium increasing 17.4 per cent to £24 billion (HY 2021: £20.5 billion) and net earned premium increasing by 14.4 per cent to £14.1 billion (HY 2021: £12.4 billion).
Continuing the trend of five consecutive years of positive rate movement, prices increased by 7.7 per cent, the organisation said.
Lloyd's said it continued to help global customers make more confident decisions in the face of unforeseen events.
In line with the early and realistic action taken on Covid-19, the market has reserved £1.1 billion net of reinsurance for customers impacted by the conflict in Ukraine.
Lloyd’s said it continues to work with governments and regulators around the world to deliver sanctions against Russia, while implementing the landmark facility announced by the market in July to insure ships recovering grain from Ukraine’s ports.
Lloyd’s capital and solvency positions remain strong with net resources at £36.5 billion (FY 2021: £36.6 billion), underlining the exceptional strength and resilience of Lloyd’s balance sheet, the organisation said.
The central solvency and market solvency ratios, of 395 per cent and 179 per cent respectively (FY 2021: 388 per cent and 177 per cent), point to Lloyd’s ability to continue supporting customers through uncertainty and challenging conditions.